Killing the goose that laid the golden eggs (Part 5)
In 1997, Banco Popular de Desenvolvimento (BPD) had domestic deposits of $120 mn and $20 mn deposited abroad in 17 different banks. But Deloitte & Touche warned that the bad debt total was very high, and BPD needed to make provisions of $23 mn, 52% of its entire loan book. Banco Português de Investimento, which was managing the privatisation, noted in its sale memorandum that credit control was "weak". The IMF insisted that BPD be privatised, but no foreign bank wanted it.
In 1996 a Mozambican group, Invester, was put together. It was headed by Octávio Muthemba, former Industry Minister. Muthemba has been an important proponent of "black empowerment" and of using that state and Banco Austral to promote "black businesspeople" ("empresariado negro"), according to metical (280 of 04.07.98). Jamú Hassan said the Invester shareholdings were one-third each Muthemba, Hassan, and Alvaro Massingue.
Muthemba was also PCA (chair) of SPI - Gestão e Investimentos, the Frelimo party holding company established in 1992. Two prominent SPI shareholders are Teodoro Waty, then a BPD administrator and now mayor of Maputo, and Carlos Morgado, then head of LAM and now Industry Minister. Waty's wife has a senior post in President Joaquim Chissano's office. SPI is an investor in the Hotel Polana Casino, represented first by Morgado and now by Waty.
Invester tried but failed to find a South African partner for BPD. President Joaquim Chissano made a state visit to Malaysia 19-21 March 1997 with Muthemba and Hassan in the delegation. Chissano is said to have made a personal request to Malaysian Prime Minister Mahathir Mohamed to provide a partner for Invester, and the Prime Minister requested Southern Bank Berhad (SBB) to participate. The reasons are not clear. This was before the Asian financial crisis and Malaysia was looking for involvement in southern Africa and pushing the concept of "smart partnership". Chissano is said have offered Malaysia preferential treatment in other areas, such as mining and Maputo property development, in exchange for solving the BPD problem. In any case, BPD was small by Malaysian standards.
SBB has links to former Malaysian minister Daim Zainuddin. In 1997 it had a 1% share of the Malaysian market and had just had a significant increase in share capital and was looking to expand. The Asian financial crisis hit Malaysia in July 1997, triggering a banking crisis there.
BPD privatisation went ahead on 3 September 1997, with the state keeping 40% and a holding company Investil taking the other 60%. Investil, in turn, was 51% SBB and Invester 49%. The two new investors were to pay $21 mn, but more than $2.5 mn of this was never paid. SBB was to provide know-how and new capital; the bank was renamed Banco Austral. SBB insisted on control of the bank, and initially named its own chief executive officer (CEO), Dato' Tan Teong Hean, as Banco Austral CEO. By the end of 1997, however, he was replaced by a separate CEO for Banco Austral, K Muganthan. Muthemba became chair (PCA).
President Joaquim Chissano has always refused to publish a list of his property, and the press has always assumed, on circumstantial grounds, that the Chissano family has close links with Banco Austral. At the time of the signing of the agreement, a photograph was published of President Chissano's son Nympine with the Malaysian buyers. In October 1998, the Malaysian director of SBB, Dato' Tan Teong Hean, set up a company called Tarpon Services with Nyimpini Chissano. Muthemba is head of Locomativas Económicas, a company set up in 1999 with the children of the leadership; the second name after Muthemba's is Nyimpiny Chissano. Mondlane, Machel and Kachamila children are also included in the company.
Meanwhile, Levy Muthemba, brother of Octávio, set up MM Trading, which then passed, via Pedro Manjate, into the hands of Nympine Chissano and Nyeleti and Eduardo Mondlane and became known as MCM (for Manjate-Chissano-Mondlane). (The varied spellings of "Nympine" are in all cases as listed in the Boletim da República.) Nympine Chissano also set up a company Afrasia with Malaysian businesspeople; this company attempted to set up a lottery and in 2001 tried to construct a building on land in front of the Ministry of Defence.
As with BCM, no due diligence audit was ever done of BPD when it was privatised, so it was impossible to see what was done by the new management and what was done by the old. This was SBB's first foreign investment and at home it was staggering under the impact of the financial crisis, so it never put in the required money and technical support. There were political battles. The Malaysians claimed Muthemba was not allowed to authorize loans, but did. In an article in Savana (6 Apr 2001) unnamed Banco Austral staff said that loans were being given to people without any guarantees, sometimes in exchange for a 10% commission to a senior official. MediaFax (18 Apr 2001) alleged that Malaysian staff also gave out loans without guarantees and talks about the "generosity" of K. Muganthan. Within 18 months, the bank was in crisis and rumours of liquidity problems were appearing in the press.
In 2000 BdM intervened to restrict new lending and forced an audit. This was carried out by KPMG and submitted on 15 January 2001. The audit showed that provisions for bad debts and other problems had been underestimated by $50 mn. KPMG reported that 31% of loans should be considered bad debts instead of the 11% assumed by the bank managers. Bad debts predating the privatisation in September 1997 exceeded Mt 200 bn, $13 mn at the time of the audit but $18 mn at the time of privatisation. But the bad debt provision for post-privatisation loans should be Mt 310 bn - which means in just three years Banco Austral had given $20 mn in loans which would not be repaid.
There were significant loans to political figures on the list which KPMG confirmed as non-performing, including:
KPMG found more than just bad loans, however. It also found "irreconcilable differences between the balance sheet and the support details" that required the writing off of an incredible Mt 69 bn ($4.3 mn). Mt 7.7 bn ($500,000) of loans to employees could not be recovered. And in the context of the reconciliation frauds to be discussed in a later article, KPMG found a hole of Mt 20.8 bn ($1.3 mn) in the accounts of transactions between headquarters and branches, and a hole of Mt 27.7 bn ($1.7 mn) in the suspense accounts (contas transitórias). Of this $8 mn, only $1.6 mn dates from before privatisation, according to KPMG.
KPMG also called for the write-off of Mt 66 bn ($4.1 mn) of "debt contracted by Southern Investments (Mozambique) Lda, resulting from the acquisition of financial assets from the bank in 1998. This whole amount should be provisioned because there are no indications that the bank can recover this debt." Southern Investments Moçambique was only registered in December 1999 and is owned by Koonjambu Murganthan, CEO of Banco Austral, and Jamú Suleman Hassan, one of the Mozambican owners.
Thus, the KPMG report suggests that of bad loans, bad accounting, theft and fraud, $15 mn were pre-privatisation and $30 were incurred in just three years of private
metical - archives 2001